U.S.-based Chipmaker Nvidia Corp. (NVDA) agreed Monday to acquire Israeli peer Mellanox Technologies Ltd. (MLNX) in a deal representing a total enterprise value of about $6.9 billion. Pursuant to the agreement, NVIDIA will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash.

The transaction, approved by both companies' boards of directors, is expected to close by the end of calendar year 2019, subject to regulatory approvals as well as other customary closing conditions, including the approval by Mellanox shareholders of the merger agreement.

Following the closure of the deal, the combination is expected to be immediately accretive to NVIDIA's adjusted gross margin, adjusted earnings per share and free cash flow. NVIDIA intends to fund the acquisition through cash on its balance sheet.

In addition, NVIDIA said there is no change to its previously announced capital return program for the rest of fiscal 2020.

The combination of NVIDIA GPUs and Mellanox's intelligent networking solutions will enable datacenters in the future will to be architected as giant compute engines with tens of thousands of compute nodes, designed holistically with their interconnects for optimal performance.